Reporting reminder for business: Declare your COVID-19 subsidies
CRA SOURCE ARTICLE
Are you a Canadian business, charity or non-profit organization that has received one or more subsidies to cover part of your employee wages and hiring expenses or commercial rent and property expenses? If so, you need to remember that these subsidies are taxable, unless you are exempt from income tax. You must report these subsidies on your income tax or information return for the tax year (fiscal period) which you are considered to have received them.
We understand that many Canadians are in difficult financial situations due to the pandemic and may find themselves owing money, possibly for the first time. We have made it easier than ever to make flexible payment arrangements.
Here’s what you need to know when declaring COVID-19 subsidies:
When to report a subsidy on your return
If you received one or more emergency subsidies, the amounts you received are considered government assistance and are taxable. You must report the subsidies amounts on your income tax or information return for the tax year (fiscal period) in which you are considered to have received them. The wage and rent subsidies are generally considered to have been received on the last day of the claim period they relate to.
How you report a subsidy on your tax or information return depends on the type of entity you are:
Corporations
Corporations need to report the subsidies they received for the tax year on both Schedule 1 of the T2 Corporation Income Tax Return (T2SCH1) and the General Index of Financial Information (GIFI).
See this section on “How to report the wage subsidy on your return” or this section on “How to report the rent subsidy on your return” for detailed instructions on how corporations must report subsidies.
Trusts
Trusts need to report the subsidies they received for the tax year on the T3, Trust Income Tax and Information Return.
See this section on “How to report the wage subsidy on your return” or this section on “How to report the rent subsidy on your return” for detailed instructions on how trusts must report subsidies.
Partnerships
Partnerships need to report the subsidies they received for the fiscal period on both Schedule 1 of the T5013, Statement of Partnership Income (T5013SCH1), and the GIFI.
See this section on “How to report the wage subsidy on your return” or this section on “How to report the rent subsidy on your return” for detailed instructions on how to fill out these returns.
Individuals
If you are an individual who received a wage subsidy amount as an eligible employer or a rent subsidy amount as an eligible entity, you need to report the total amount you received on the statement of activities form(s) that apply to your situation.
Unincorporated businesses
Individuals, sole proprietors (including unincorporated, self-employed individuals), self-employed farmers, self-employed fishers, and partners in a partnership can look at this section on “How to report the wage subsidy on your return” or this section on “How to report the rent subsidy on your return” to find out how to report the subsidies.
Tax-exempt employers and entities
If you are a tax-exempt employer or entity (such as a registered charity or a non-profit organization) and you received a subsidy amount as an eligible employer or entity, you may have to report the total amount you received on the information return that applies to your situation, even though the amount is not taxable to you.
For Non Profit Organizations (NPO) see T1044 Income Tax Guide to the Non-Profit Organization Information Return. An organization that has to file an NPO information return may also have to file other returns such as a T2, Corporation Income Tax Return, a T2 Short Return, or a T3, Trust Income Tax and Information Return. For more information on how to file these returns, see guides T4012, T2 Corporation – Income Tax Guide, and T4013, T3 – Trust Guide.
For registered charities see T4033 Completing the Registered Charity Information Return.
How to change or cancel a claim
The deadline to apply for each claim period and to increase the amount of your previous claim is 180 days after the end of the claim period. There is no deadline to cancel a claim or to reduce the amount of a past claim. Cancelling or changing a claim depends on the subsidy you are claiming. Click on the following to find out how to:
Important reminders:
There are no GST/HST reporting requirements: Wage and rent subsidy amounts you received are not considered taxable supplies. Do not include these amounts on the GST/HST return.
Temporary wage subsidy (TWS) reporting: If you took advantage of the temporary 10% wage subsidy in 2020 and have a fiscal period ending in 2021, read about the T4 and tax reporting requirements for the TWS.
Employees who received income supported by a wage subsidy report as usual: Employees who received income supported by a wage subsidy their employer received do not need to take any special action when completing their returns. Employment income will appear on the T4 as usual, whether the employer used the wage subsidy to pay the wages or not. There are no T4A slips issued for wage subsidies like there are for COVID benefits paid directly to individuals.
You can learn more about covid benefits and tax filing by visiting the links above or by scheduling a free consultation with us.